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A one-question test for your law firm

To figure out how good your lawyer is, give him or her the following test. It only has a single question, so it will only take about three seconds to administer. On the other hand, it will take considerably longer to answer. And it should.

The answer your lawyer gives you won’t necessarily be the same as the answer he or she gives another client.

“It depends” is not an acceptable answer. Neither is “Well, there are variables ....”

One of the commonest complaints I hear from CFOs and general counsels is that law firms pitching their wares always talk about how good they are and how experienced they are. Unlike other vendors, they never talk about how they’re going to save the company money. That’s because the law-firm business model doesn’t provide a means for doing that. In the billable-hour system, costs are passed on to the client, meaning that there is no incentive to reduce them. Meaning that they won’t.

A fixed price avoids that problem, and requires the law firm to be efficient. But a fixed price also requires the law firm to know and understand the value of its services, something it can only do well if it really knows its business.

Many lawyers have insisted to me that you can’t put a fixed price on litigation. There are variables, they whinge. We can’t control the costs. What if the other side hits us with a bunch of discovery? What then?

What then indeed.

If your law firm knows its business well, then it should know the value of the service it provides. Hiding behind a fear of variable costs is an admission that you don’t really know your business. An airline doesn’t say “there are variables” when charging you for your ticket. And yet headwinds, storms, airport congestion, and overtime can dramatically increase the airline’s cost of a particular flight. But your ticket price won’t change after they sell it to you.

The Red Sox won’t say “there are variables” when selling you a ticket for tonight’s Yankees game. Yet Sox-Yankees games tend to be much longer than other games; plus it’s raining lightly with more weather expected. A longer game, especially one with rain delays, means increased costs for the Red Sox in wages, overtime, electricity costs, and so on. But your ticket price won’t change after they sell it to you.

Comments

A one-question test for your law firm

To figure out how good your lawyer is, give him or her the following test. It only has a single question, so it will only take about three seconds to administer. On the other hand, it will take considerably longer to answer. And it should.

The answer your lawyer gives you won’t necessarily be the same as the answer he or she gives another client.

“It depends” is not an acceptable answer. Neither is “Well, there are variables ....”

One of the commonest complaints I hear from CFOs and general counsels is that law firms pitching their wares always talk about how good they are and how experienced they are. Unlike other vendors, they never talk about how they’re going to save the company money. That’s because the law-firm business model doesn’t provide a means for doing that. In the billable-hour system, costs are passed on to the client, meaning that there is no incentive to reduce them. Meaning that they won’t.

A fixed price avoids that problem, and requires the law firm to be efficient. But a fixed price also requires the law firm to know and understand the value of its services, something it can only do well if it really knows its business.

Many lawyers have insisted to me that you can’t put a fixed price on litigation. There are variables, they whinge. We can’t control the costs. What if the other side hits us with a bunch of discovery? What then?

What then indeed.

If your law firm knows its business well, then it should know the value of the service it provides. Hiding behind a fear of variable costs is an admission that you don’t really know your business. An airline doesn’t say “there are variables” when charging you for your ticket. And yet headwinds, storms, airport congestion, and overtime can dramatically increase the airline’s cost of a particular flight. But your ticket price won’t change after they sell it to you.

The Red Sox won’t say “there are variables” when selling you a ticket for tonight’s Yankees game. Yet Sox-Yankees games tend to be much longer than other games; plus it’s raining lightly with more weather expected. A longer game, especially one with rain delays, means increased costs for the Red Sox in wages, overtime, electricity costs, and so on. But your ticket price won’t change after they sell it to you.